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process by which individuals and groups obtain what they need and

want through creating, offering, and exchanging products of value

with others. Additionally, it is all too often equated only with the

more focused function of selling. But marketing encompasses a

wider range of activities that must be a fully integrated process

and, indeed, will form a foundation and catalyst for making sales.

Further, the key to successful sales is a consistent proactive market-

ing strategy.

MARKETING’S KEY COMPONENTS:

CREATING VALUE FOR THE CUSTOMER

What, then, is the key to a consistent proactive marketing strategy?

First and foremost it is a philosophy that dedicates resources of the

firm to ensuring that the wants, needs, and demands of the customer

are the firm’s focus. This customer-focused mentality is the foundation

of the strategy that makes up the entire marketing process.

Second, it is a plan, supported by the firm’s philosophy. Once

the philosophy is in place, a plan can give direction, guidance, and a

structure for proactive strategies that will increase sales and improve

business relationships. Often firms find themselves dedicating re-

sources to marketing activities—from trade shows to flyers—and

spending money on marketing that is not targeted to the right audi-

ence at the right time. This is reactive marketing with a shotgun,

rather than a rifle. Conversely, a proactive, focused marketing plan

can provide guidance for targeting the right audience at the right

place and at the right time, which in turn maximizes the return on

investment and increases revenues.

Third, marketing is a process of creating value for the customer.

It is a set of activities to educate, communicate with, and motivate the

targeted consumer about the firm’s services or the company’s product

and services.

Traditionally, this set of activities, the “marketing mix,” is repre-

sented by four parts, the well-known “4 P’s of Marketing”: price, prod-

uct, placement, and promotion. But to create a marketing strategy and

plan that touch on all areas necessary to position a product in the mar-

ket to maximize sales revenues, there are multiple areas to be tackled.

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An effective marketing strategy/plan is an ongoing value-creating

process composed of several elements:

✔ Marketing segmentation.

✔ Marketing strategy.

✔ Market research.

✔ Pricing.

✔ Placement.

✔ Value chain.

Market Segmentation

One of the first steps in developing an overall marketing strategy is to

perform a market segmentation analysis, as a way to manage the strat-

egy development process and ensure its effectiveness and success. The

concept behind market segmentation is intuitive and relatively simple.

Market segmentation is simply taking a look at the overall market for

your product and service and thinking of it in terms of smaller, more

manageable pieces.

Think of market segmentation as what Bert and Ernie from

Sesame Street sing about when they suggest “One of these things is not

like the other . . . one of these things doesn’t belong.” In a sense, that’s

what we are doing when we segment a market—we are looking at the

whole and trying to determine how we can group the mass market into

smaller groups that, while different from each other, within the groups

are more alike.

Once we have identified these subgroupings, we can target which

of these market segments are likely to be the most productive and be

the best fit with our company’s strengths and competitive advantages.

A well-used example of market segmentation is the way the play-

ers in the hospitality industry look at the market for hotel/motel

rooms. Rather than take a “one size fits all” approach to this market, a

company like Marriott looks at the overall market and segments it into

several smaller, but more focused market segments. For the “travel and

leisure” segment of the overall hotel/motel market, Marriott’s Fairfield

Inn is located near major tourist attractions, is budget priced, and ap-

peals to families. For the middle-level manager who travels a lot and

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wants some comforts of home while on the road, the Courtyard by

Marriott is located near businesses and has a residential “feels like

home” atmosphere. For CEOs and top-level executives, Marriott’s Ritz-

Carlton has all the upscale amenities and top-level customer service

that presidents and CEOs of business and industry are used to and ex-

pect when they travel. Note in these examples how Marriott has bro-

ken this overall mass market into more manageable, more focused

segments, and, importantly, how its marketing strategy for each seg-

ment is tailored to that segment.

By applying the principles of market segmentation, marketers can

make better use of their marketing budgets and more efficiently man-

age their overall marketing strategy.

Marketing Strategy

To build a strong and durable house, it is necessary to create blue-

prints. Likewise, to build a strong and profitable business, it is neces-

sary to develop a strategy. Essentially, marketing strategy is a plan that

allows a business owner to direct activities that are consistent with the

goals of the business owner and organization and spend money wisely

in order to create the greatest amount of return on investment.

Market Research and Competitive Intelligence

To thoroughly understand what is happening in the industry in which

you operate, it is invaluable to know what the trends in the industry

are as well as what the firm’s competitors are doing to make money, to

improve their businesses, and to improve their own market shares.

Market research is necessary to make better firmwide decisions. With

marketing being a philosophy where the resources and activities of the

firm or company are focused on satisfying the wants and needs of the

customer, marketing research is the way a firm with a marketing phi-

losophy determines what those wants and needs may be, and further,

how to communicate the associated benefits most effectively and effi-

ciently. Additionally, market research is used to monitor and modify, if

needed, the elements of the marketing strategy. Market research in-

cludes: defining the problem and research objectives, developing a re-

search plan, presenting the plan, implementing the plan (collecting

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and analyzing data), and interpreting and reporting the findings. This

is the area of marketing where we begin to see science as well as art.

This chapter focuses in detail on how to research a market, how to

know the competition, and how to leverage that knowledge to improve

your business.

Pricing

To sell a product for a particular price, value must be created. Value is

the consumer’s estimate of the product’s overall capacity to satisfy

his/her needs. When the value placed on a product or service is high,

then satisfaction is achieved. Consumers are savvy and will choose

based on the level of satisfaction that corresponds with the price. If a

bottle of Coca-Cola were priced at $5 while a liter of Pepsi-Cola was

priced at $1, it is likely that the sales of Coke would decrease. If these

were the only two options at the supermarket, the likelihood of Pepsi

sales increasing is high. Pricing is what your customer is willing to

trade in return for a product—that is, the value they place on a product

or service. Generally, a “price/quality” relationship exists, where the

higher the price, the higher the quality; especially in the case of per-

sonal services, consumers will expect a higher level of service if the fee

associated with that service is higher relative to other providers of sim-

ilar services.

Marketers may elect to skim the market with a relatively high

price at first, and then, as demand wanes at this relatively high price,

gradually lower the price. New, innovative products often use this pric-

ing strategy because their newness and uniqueness may enable a

higher price at first. As copycats and competitors enter the market,

prices will fall to meet the market price.

Some marketers, though, may use a penetration strategy, where

the product or service is offered at a very low price, in order to quickly

grab market share and be considered the low price provider. Wal-Mart

is an example of a company using a penetration pricing strategy.

Pricing is a powerful tool in developing a marketing strategy with

a strong connection to the financial condition of the organization.

Pricing too low may result in economic consequences if costs are not

covered, and pricing too high may stunt demand and sales of the prod-

uct or service, also resulting in adverse economic consequences.

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Placement

A customer will not likely purchase a service or product unless it

can be relatively easily accessed. Placement can be anything from a

magazine or candy bar sitting next to the checkout counter at the

supermarket—a spontaneous purchase—to gas stations situated on

the right-hand corner of the exit from a highway or to the location

of a orthodontics office in the same complex as a pediatrician’s of-

fice. Placement helps make the purchasing process for a customer

easier and more convenient. Often the term distribution is used

interchangeably for the placement component of a marketing strat-

egy and includes the decisions a company or firm must make to

ensure the connection with the customer or client. Placement is

how the marketer connects the products or services with the cus-

tomer—the easier, more convenient, more accessible the product or

service may be, the more likely the customer will purchase the prod-

uct or service.

Value Chain

All of the aforementioned parts of the marketing plan cannot be car-

ried out to the full level of effectiveness without all areas—a value

chain—working together. Generally, the value chain includes the fol-

lowing activities:

✔ Inbound logistics—bringing raw materials into the business.

✔ Operations—management of processes to create the product or

service for the customer.

✔ Outbound logistics—the means for getting the product or ser-

vice to the customer (for example, distribution systems and

shippers to get products into retail stores).

✔ Marketing and sales—creating value.

✔ Service—aligning customer expectations and the performance

of the product or service.

✔ Firm infrastructure—the organization of the firm to maximize

service to the customer.

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✔ Human resources management—creating a structure for the

people in the firm, which includes recruitment, training, re-

tention, and compensation of employees.

✔ Technology—using technology to maximize service, thereby

enhancing customer value.

MARKETING AS AN INVESTMENT

Successful companies that become excellent marketing organizations

know themselves, their customers, and what they offer that fills the

customers’ needs. This requires an investment of time and money to

accurately determine whether all three parts of the triangle fit together.

As an example, ABC Company is about eight years old and oper-

ates in the online professional services industry. The customer wants

and needs this service. Most importantly, the customer is willing to pay

for the service and ABC Company is the only company occupying this

space at this time. One would imagine that ABC Company is generat-

ing a strong and regular revenue stream. Unfortunately, ABC Com-

pany’s CEO does not believe in investing in consistent marketing

strategies and targeted marketing initiatives. Rather, the CEO pays low

wages to inexperienced salespeople who have no incentive or support

to sell the service. Therefore, due to a lack of investment in marketing,

the customer does not even know that ABC Company exists. The fall-

out of such poor strategic thinking could be that employees often are

not paid in a month, morale plummets, and company reputation lags.

BECOMING A MARKETING

ORGANIZATION: BE TRUE TO YOURSELF

As set forth in the preceding sections, marketing is the process

of building a strategic plan. However, without buy-in from the orga-

nization as a whole, becoming a marketing organization is more

challenging.

A marketing organization is not a firm that sells marketing ser-

vices. A marketing organization is a firm—regardless of industry,

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function, size, or region—in which all levels of the organization ad-

here to the same ideals and uniform methods for attaining customers.

As an example, Southwest Airlines has created a marketing organiza-

tion. It has three company “policies”:

✔ Practice the Golden Rule. We have a choice every day and

choose to make our employees our first customers and our

passengers our second customers.

✔ Help each other out.

✔ Feel free to be yourself.

Integrate, Integrate, Integrate

Southwest ensures that these messages as well as any marketing mes-

sage is integrated throughout every part of the organization and in

every point of contact with the customer—noting that the customer is

both the Southwest employee as well as the purchasing passenger. This

ability on Southwest’s part to create a marketing organization—or a

marketing culture—allowed it to weather economic downturns and

adverse industry trends.

Becoming a marketing organization also allows the entire team

to understand the value of the firm’s products to the customer and

behave in a manner in which selling is a way of life. For example, a

consulting firm may have strategic consultants working on projects

at the client’s office. Because of this situation, the consultants are

able to observe the client’s business processes at every stage, and

thus have an inside view of the needs of the client. This can create

an “upsell” opportunity. Upselling is the process of adding a product

or service to an existing project. For all marketers, gaining more

share of an existing customer is a more effective overall marketing

strategy than working hard to find more customers. Customer or

client loyalty is a much smarter long-term strategy, because satisfied

customers become “salespeople” in attracting new customers. Addi-

tionally, satisfied customers have trust and confidence in your firm’s

offerings and are more likely to buy more, buy more often, and, be-

cause of the lower marketing costs associated with existing cus-

tomers, become more profitable. The most expensive customer to

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acquire is a new customer; the most cost-efficient customer is an ex-

isting one.

If the employee doesn’t “get it,” the customer won’t.

There are numerous ways that all businesses can become market-

ing organizations and create buy-in on all levels.

✔ Communication. A firm may ensure that decisions are commu-

nicated quickly and honestly on all levels of the company so

that employee questions, fears, and rumors do not erupt.

✔ Training. Training is important to ensure that every employee

knows exactly what the firm does to generate revenue and

what impact that individual has on that process. Ongoing

training in customer service at all levels of the organization

will add greatly to the effectiveness of the company’s market-

ing strategy.

✔ Tools of the trade. People take action when empowered with

the right tools to do so; therefore, it is important to create the

tools to make each employee’s job easier—whether it be a

technological system or a brochure to distribute to customers

or the process to do his/her job with clarity.

STRATEGY

In short, strategy is a bridge that connects a firm’s internal environ-

ment with its external environment, leveraging its resources to adapt

to, and benefit from, changes occurring in its external environment.

Strategy is also a decision-making process that transfers a long-

term vision into day-to-day tactics to effect the long-term plan. Al-

though often thought of only as something reflected in a business

plan, strategy is rather a continual process of assessment, reassess-

ment, and analysis, which constantly provides direction to the firm.

Strategy can be compared to the captain on the bridge of a ship, who

is constantly scanning both the horizon and the immediate surround-

ings and adjusting the course, possibly taking the ship in another di-

rection if a storm appears on the horizon or if an object appears to

obstruct the path.

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POSITIONING AND STRATEGY

The position the firm fills in the marketplace is an integral part of the

strategic process. Positioning can also be thought of as how the firm

will stake a claim in a piece of the marketplace in a manner that will

differentiate it from competitors. The key to sustainable strategy and

positioning is an integrated marketing system. Competitive advantage

comes from the ability to identify the firm’s position, make strategic

plans, and engage an entire integrated marketing system. All activities

of the firm should fit together and complement each other to produce

a well-oiled machine, which creates differentiation in the customer’s

mind and competitive advantage.

Strategy involves all areas of the firm from operations to finance

to human resources. Choosing the right strategy for the right people

for the right goals is challenging yet provides an overarching message

for the entire organization. The strategy and message must then be

communicated consistently and clearly throughout the firm for its ef-

fectiveness to take effect and produce a sustainable organization.

TACTICS

While strategy is the overall direction, the long-term mile markers,

and/or the guiding force of how the organization moves forward, tac-

tics are the specific steps that are taken to implement the strategy.

Strategy tends toward the longer term; tactics are the shorter-term

steps taken to achieve the long-term strategy.

For example, XYZ Company is a health and fitness center.

Strategically, the firm leadership has decided to develop a center tar-

geted at the 30 to 65 year-old woman and create a comfortable envi-

ronment in which she can exercise, lose weight, and learn more

healthy life habits. The firm’s strategic geographic positioning is to

provide centers in suburban areas where the largest number of these

women live. The tactics used for carrying out this strategy include

developing consistent messages and advertisements reflecting the

mission of the firm targeted to this market segment, hiring other

women trainers so the women customers will be comfortable, and

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providing health and fitness educational materials specific to the ma-

ture woman customer that will create a relationship between XYZ

Company and this market segment.

PEST ANALYSIS

Although easy to remember and easily forgotten by firms in developing

a long-term strategy, a “PEST analysis” is an acronym for analyzing the

external environment (political, economic, sociological/demographic,

and technological) and setting the stage for strategic planning. Also

known as “environmental scanning,” the PEST analysis reviews the en-

vironment of a market—whether emerging or existing—and provides a

snapshot of the external situation that may impact an industry or the

firms within that industry.

Political Environment

Often considered more relevant when entering a foreign market,

the political situation in any new or existing market is invaluable

to study and understand. Existing government policies and regu-

lations can deter new entrants into an economy, particularly in

underdeveloped or developing areas of the world, or can swiftly

affect incumbents in an industry with new regulations and poli-

cies that can have both positive and negative results. For example,

even though the Graham-Leach-Bliley Act in the 1990s in the

United States repealed the New Deal era Glass-Steagall Banking

Act and allowed some financial companies to expand their ser-

vices, it also impacted those firms because they were not permitted

to sell both institutional and investment services. Likewise, the

Sarbanes-Oxley Act of 2002 prohibited firms such as those in ac-

counting and financial services from providing consulting and au-

diting services. Additionally, government policies can add extra

expense to firms; for example, the HIPAA regulations of the late

1990s required health-care organizations and all related firms to

protect patient information, which led to increased costs to these

providers.

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